This Term, U.S. Supreme Court Agrees To Hear 2 Significant Securities Cases

The first Monday in October is the opening day of the new Supreme Court term. In recent years the Court has heard a number of securities cases, considering issues regarding class certification in Erica P. John Fund v. Halliburton, 131 S. Ct. 2179 (2011), materiality in Matrixx Initiatives Inc. v. Siracusano, 131 S.Ct. 1309 (2011) , and primary liability in Janus Capital Group, Inc. v. First Derivative Traders, 131 S.Ct. 2296 (2011).

This term the Court has agreed to hear two significant securities cases. One centers on when the five year statute of limitations for brining a penalty claim begins to run in SEC and other government enforcement actions. Gabelli v. SEC, Docket No. 11-1274. The other focus on whether the plaintiff in a securities fraud class action must establish materiality at the class certification stage in a fraud-on-the-market case. Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, Docket No. 11-1085. Each presents the High Court with conflicting themes.

Gabelli presents the Robert's Court with a conflict between its favored strict statutory construction approach law enforcement. The case turns on when the statute of limitations in Section 2442 of Title 28 begins. That Section provides for a five year statute of limitations for penalties, specifying that "except as otherwise provided by Act of Congress" any penalty action brought by the government must be "commenced within five years from the date when the claim first accrued."

The underlying SEC enforcement action charged fraudulent statements and concealment in a market timing case. The Second Circuit concluded that the five year limitation period did not begin to run until the fraud was discovered or reasonably could have been discovered. That ruling preserved the SEC's claim, brought in April 2008 based on conduct that occurred from 1999 through 2002.

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